Natural Gas Fundamental Forecast – May 17, 2016

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Published: May 16, 2016, 09:27 UTC

Natural Gas dipped 9 points to 2.087 as cooler temperatures continued across the northeast and south. It looks like it is going to be a mild summer with

Natural Gas Fundamental Forecast – May 17, 2016

Natural Gas dipped 9 points to 2.087 as cooler temperatures continued across the northeast and south. It looks like it is going to be a mild summer with air conditioning demand lower than originally predicts.

Forbes said that combined with lower than expected growth, both oil-linked contract prices and spot prices have plummeted and narrowed the price differentials between the three major markets: the Americas, Europe, and Asia.

The global LNG market is still 70% dominated by the long-term, oil-indexed gas contracts that U.S. LNG is expected to help scale down. But, “less than 15% of contracted volumes expiring in next 5 years.” Even these long-term contracts are becoming increasingly flexible, shown by Gazprom’s move toward new market-driven tools.

The competition for the U.S. LNG business will be increasingly fierce. In past years, high oil prices and rising reserves bettered the economics of exporting LNG, driving investment in a new wave of liquefaction projects that will be coming online just as U.S. projects get ramped up.

According to CNBC Goldman Sachs has quietly overtaken Chevron and ExxonMobil to become one of the biggest natural gas merchants in North America, expanding in physical commodities trading even as other banks pull back.

The Wall Street institution last year bought and sold 1.2tn cubic feet of physical gas in the US — equal to a quarter of the country’s residential consumption and more than twice its volumes in 2013, a recent regulatory filing revealed. Goldman is now the seventh-largest gas marketer in North America, according to Natural Gas Intelligence.

Goldman moved into the gas merchant business when it acquired the North American natural gas marketing operations of Nexen, a Canadian oil company, in 2010. After dealing 3.42bn cu ft per day in 2011, its North American volumes rose 71 per cent to 5.86bn cu ft/d in 2015, according to NGI. The average US household that heats with natural gas uses 50,000 cu ft of gas in a year, according to the Energy Information Administration.

Natural Gas Weekly Weather Outlook

May 16-22nd: Numerous weather systems will impact the US this week with heavy showers and thunderstorms. It will be cool over the Great Lakes and northeastern US the next few days in the wake of the weekend cool blast, but then moderating into the upper 60s and 70s by mid-week. It will remain warm over the southern US where mostly 70s and 80s are expected, but with limited coverage of 90s. For the West, it will remain warm and unsettled. Overall, an active Spring pattern will continue with mostly upper 60s to 80s, but still with heavy showers, particularly over TX and the southern US. Simply, the northern and eastern US will drive stronger than normal nat gas demand to open the week, but then with national demand easing later in the week as more comfortable temperatures shift northward. Overall, much of the country will experience LOW nat gas demand this week after being MODERATE the next 2 days.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.